UK CAPITAL GAINS TAX: This tax has to be paid when you profit on an asset you are selling

When you sell, or “dispose of” an asset that has increased in value, you need to pay capital gains tax.

The tax you pay is based on the gain you make, not the total amount of money you receive.

“Disposing” of something counts if you are selling an asset, giving it away as a gift, swapping it for something else or getting compensation for it.

However, there are some assets you don’t need to pay tax on. And better yet, you don’t have to pay Capital Gains Tax if your gains are under the tax-free allowance.

Luckily, this allowance is due to rise, meaning you can pay less in tax.

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When will the Capital Gains Tax increase?

It was announced in the 2017 Autumn Budget statement that the annual Capital Gains Tax allowance would increase from the new tax year.

This means it will rise from April 6, 2018.

How much will Capital Gains Tax rise?

Capital Gains Tax will rise from £11,300 to £11,700 – meaning there will be a 3.5% rise.

This means that you can have a profit of £11,700 before you need to pay tax on it.

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“This extra allowance is a welcome boost for investors and second property owners as it will allow them to keep more of their money when they release their gains”

Sean McCann – Chartered financial planner at NFU Mutual

Married couples or civil partners can combine their allowance, meaning their total would be £23,400.

Assets held in a trust will rise from £5,650 to £5,850.

Sean McCann, chartered financial planner at NFU Mutual, said: “This extra allowance is a welcome boost for investors and second property owners as it will allow them to keep more of their money when they release their gains.

“It will be worth a combined £23,400 for married couples and civil partners, who have the advantage of being able to transfer assets between each other without triggering a capital gains tax charge.

“Both spouse’s annual exempt amounts can be used in full of potential tax bills can be cut further if one of the couple pays lower rate of tax.”